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The agriculture sector which employs more than 55% of India's
work force stands at a cross roads. Measures taken by the government during
next few years would decidethe shape
the agriculture sector would take

Huge food grains stocks
and rising exports of India’s agricultural goods, the union budget presentation
for 2013-14 would not have come at a better time for the sector which employs
more than half of country’s working class population.

As finance minister P Chidambaram
rose to present the union budget for the year 2013- 14, there was lot of
expectation from the arming community. Nothing explains the agriculture sector
better than the Economic Survey 2012-13 presented before the parliament just a
day before the union budget was announced. The survey observed “Indian
agriculture is broadly a story of success. It has done remarkably well in terms
of output growth, despite weather and price shocks in the past few years,”.

The Eleventh Five Year
Plan (2007-12) agricultural and allied sector witnessed an average annual growth
of 3.6 percent in the gross domestic product (GDP) against a target of 4.0
percent. While it may appear that the performance of the agriculture and allied
sector has fallen short of the target, production has improved remarkably, growing
twice as fast as population. “India’s agricultural exports are booming at
a time when many other leading producers are experiencing difficulties,” the survey which is an annual report card of government’s performance noted.

At a nutshell, India is
the firstin the world in terms of
production of milk, pulses, jute and jutelike fibres, second in rice, wheat, sugarcane, groundnut, vegetables, fruits and cotton production, and is a key producer of spices and plantation crops as well
as livestock, fisheries and poultry
sector.

Prior to announcing the
budget measures, Chidambaram said,” thanks to our hard working farmers, agriculture
continues to perform very well. The average annual growth rate of agriculture
and allied sector during the 11th Plan was 3.6 percent as against 2.5 percent
and 2.4 percent, respectively, in the 9th and 10th Plans,”.

He noted in 2012-13,
total food grain production will be over 250 million tonnes. “Minimum support
price of every agricultural produce under the procurement programme has been
increased significantly. Farmers have responded to the price signals and
produced more. Agricultural exports from April to December, 2012 have crossed
Rs 138,403 crore,” Chidambaram noted.

Though government
constantly focuses on increasing exports of manufactured goods and services, according
to a recent paper written by the Commission for Agricultural Costs and
Prices (CACP) Chief Ashok Gulati and others, its off-on policy on
agricultural exports is preventing the country for achieving its potential.

“If the government is
proactive, FY’12 exports can cross $42– 43 billion”, Gulati says. In
2011-12, according to Gulati, agricultural exports by India were more than $37
billion against an import of commodities worth around $17 billion.

India has emerged as the world’s
largest exporter of rice, replacing Thailand and Vietnam and the country
has also the biggest exporter of buffalo meat beating traditionally strong
countries such as Brazil, Australia and the US.

CACP research paper titled ‘Farm trade: Tapping the hidden potential’
has stated that agricultural exports have increased more than 10 fold from
$3.5 billion in 1990-91 to $37.1 billion in 2011-12. “This share is more
than the share that India has in global merchandise exports,” the paper has
noted.

The agriculture sector
which employs more than 55% of the country workforce stands at a cross roads. Measures taken by the
government during next few years would decide the shape the agriculture sector
would take.

As the latest Economic
survey points out that “India is at a juncture where further reforms are
urgently required to achieve greater efficiency and
productivity in agriculture for sustaining growth. There is
need to have stable and consistent policies where markets play a deserving role
and private investment in infrastructure is stepped up. An efficient supply chain
that firmly establishes the linkage between retail demand and the farmer will
be important,”

The survey also points
out that rationalization of agricultural incentives and strengthening of food
price management will also help, together with a predictable trade policy for
agriculture. These initiatives need to be coupled with skill development and
better research and development in this sector along with improved delivery of
credit, seeds, risk management tools, and other inputs ensuring sustainable and
climate-resilient agricultural practices.

One of the key proposal announced
by Finance Minister P Chidambaram in his budget speech includes close to 22% jump in the agriculture credit target for the next fiscal besides granting similar hike in allocation for the agriculture ministry.
“Agricultural credit is a driver of agricultural production. We will exceed the
target of Rs 5,75,000 crore fixed for 2012-13.
For 2013- 14, I propose to increase the target to Rs
7,00,000 crore,” Chidambaram said while presenting the Budget for the 2013-14.

The finance minister also
announced continuance of the interest-subvention for short-term crop loan. Farmers
who repay loan on time will be able to get credit at 4% interest per annum.
He also announced extension of crop loan scheme to
private sector banks along with the loan extended by public sector banks,
Regional Rural Banks and cooperative banks.

“So far, the scheme has
been applied to loans extended by public sector banks, Regional Rural Banks and
cooperative banks, I propose to extend the scheme to crop loans borrowed from
private sector banks and scheduled commercial banks in respect to loans given within
the service area of the branch concerned,” Chidambaram announced.

Similarly, another thrust
of the finance minister’s budget proposal was 22%
increase in financial grantfor the agriculture
ministry to Rs 27,049 crore for the next
fiscal in comparison to last year. The hike in
allocation also includes Rs 3,415 crore earmarked for agricultural research.

Another key proposal
announced by the finance minister include a Rs 1000 crore allocation
under the Bringing Green Revolution in the Eastern India (BGREI) for the next
fiscal. For augmenting rice production in states including Assam, Odisha,
Jharkhand and West Bengal, the government had allocated Rs 400 crore in 2011-12
and Rs 1000 crore during the current fiscal.

“The original Green
Revolution States face the problem of stagnating yields and over-exploitation
of water resources. The answer lies in crop diversification.
I propose to allocate Rs 500 crore to start a programme of crop diversification
that would promote technological innovation and encourage
farmers to choose crop alternatives,” Finance minister observed.

The finance minister Chidambaram
announced setting up of Farmers Producers Organisation (FPO) with an
allocation of Rs 50 crore matching equity grants for registration process.

Each FPO will get a
maximum of Rs 10 lakh to leverage working capital
from financial institutions which would help farmers
in marketing of their produce. Besides, a credit
guarantee fund will be created in a small farmers agribusiness corporation with
an initial corpus of Rs 100 crore.

In a bid to help small
farmers get better price realisation, the NAC earlier has recommended the creation
of ‘farmers companies’ with the support of the government, which would deal
with critical issues such as market linkage and value-addition in the farm
sector.

According to the report
prepared by a working group appointed by NAC on ‘enhancing farmer income for smallholders
through market integration’, 83 % of
Indian farmers are small and marginal
(2005-06), covering nearly 50% of operational holdings.

“To signal our support to
them, I intend to provide matching equity grants to registered FPOs upto a maximum
of 10 lakh per FPO to enable them to leverage working capital from financial institutions. I propose to provide Rs 50 crore for this purpose. Besides, a
Credit Guarantee Fund will also be created in the Small Farmers’ Agri Business Corporation
with an initial corpus

of Rs 100 crore. I urge
State Governments to support such FPOs through necessary amendments to the
Agricultural Produce Market Committee (APMC) Act and in other ways,”
Chidambaram announced.

Besides, the finance
minister also increased allocation under the Rashtriya Krishi Vikas Yojana,
which aims at mobilising higher investment in agriculture and the National Food
Security Mission, for bridging yield gaps. He announced allocation of Rs
9,954 crore and Rs 2,250 crore, respectively, for these two programmes.

Small and marginal
farmers are vulnerable everywhere, and especially so in drought prone and ecologically-stressed
regions. The allocation under the watershed management was hiked to Rs
5387crore for the next fiscal.

Many agricultural scientists
had suggested that the government must start a pilot programme on Nutri-Farms
for introducing new crop varieties that are rich in micro-nutrients such as iron
rich bajra, protein-rich maize and zinc-rich wheat. Finance
minister announced an allocation of Rs 200 crore for launching pilot projects. “Ministry
of agriculture will formulate a scheme and I hope that agri-businesses and
farmers will come together to start a sufficient number of pilots in the districts most affected by
malnutrition,” he announced.

The proposal to establish
the National Institute of Biotic Stress Management for addressing plant
protection issues at Raipur, Chhattisgarh and the Indian Institute of
Agricultural Bio-technology at Ranchi, Jharkhand was approved by the finance
Minister.

A pilot scheme to replant
and rejuvenate coconut gardens that was implemented in some districts of Kerala
and the Andaman & Nicobar Islands would be now extended to the rest of the
districts of Kerala for which an additional allocation of Rs 75 crore made for 2013-14.

“We are certain many of
the new initiatives of the Government shall go a long way in empowering farmers
by increasing their incomes and ensuring sustainable livelihoods.

We strongly believe as we
sharpen our focus on sustainable food production and its supply, technology
shall play a pivotal role,” Ram Kaundinya, Chairman, ABLE-AG (Association of
Biotech Led Enterprises-Agriculture Group) observed.

For giving boost to
livestock sector, the National Livestock Mission will be launched in
2013-14 to attract investment and to enhance productivity taking into account local
agro-climatic conditions. Finance minister announced allocation of Rs 307 crore
for the mission. Besides this there would be a sub Mission for increasing the availability
of feed and fodder.

With the proposed National
Food Security Bill, which is expected to be passed during next few months, finance minister set aside Rs 10,000crore for proposed food security legislation which expected to
bring in more than 67% population for distribution of subsidized food grains distribution.

The finance minister also
announced inclusion of all the other agricultural development activities including
National Food Security Mission, National Mission on Sustainable Agriculture
including Micro Irrigation, National Mission on Oilseeds and Oil Palm,
National Mission on Agricultural Extension and Technology and National Horticulture
Mission.

All the measures are
expected to give boost to the critical sector of the economy. However the economic
survey points out two critical areas which needs urgent attention of the
government.

In case of oil seeds,
India is one of the largest producers of oilseeds in the world. However, 50
percent of its domestic requirements are met through imports, out of which crude
palm oil and RBD palmolein constitute about 77 percent and soyabean oil
constitutes about 12 percent. Import dependence was only about 3 percent during
1992-3. With rising purchasing power, the edible oil consumption is increasing steadily
during last many years.

The production of
oilseeds, though it has increased in recent years (from 18.44 million tonne in 2000-1
to 29.79 mt in 2011-12), has not kept pace with the demand for edible oils in
the country. Imports have helped raise the per capita availability of edible
oils which has increased from 5.8 kg in 1992-93 increased to 14.5kg in 2010-11.

“Considering the
situation, it is time to frame a price band for edible oils in a manner that
harmonizes the interests of domestic farmers, processors, and consumers through
imposition of import duty at an appropriate rate. The import duty would also
generate revenue, which could also be utilized for an oilseeds development
programme,” the economic survey has noted.

On sugar sector, it is well
known that India is the largest consumer and second largest producer of sugar
after Brazil. Sugar and sugarcane are
notified as essential commodities under the Essential
Commodities Act 1955. The production of sugarcane during 2012-13 is estimated
at 334.54 million tonnes. However the Indian sugar sector suffers from policy inconsistency
and unpredictability. The sugar industry in India is overregulated and prone to
cyclicality due to price interventions.

“Deregulation of the
sugar industry has been widely debated for a long time. From a purely economic
point of view, greater play of market forces would provide better prices and
serve the interests of all stakeholders. The government should come into the picture
only in situations where absolutely necessary. Export bans and controls could
be replaced with small variable external tariffs to stabilize prices,” the
survey noted.

In conclusion, the
economic survey aptly sums up the key challenges faced by the critical sector
of the economy. While stating that the farmers’ access to markets is hampered
by poor roads, rudimentary market infrastructure, and excessive regulation, the
survey suggested private sector involvement in creation of efficient market in order to provide farmers an alternative competitive marketing channel for
transaction of their agricultural produce at

remunerative prices. For
most of these challenges, budget had some measures announced which is an encouraging
signs for giving boost to the sector in the long run.

Ajay Vir Jakhar, Chairman,
Bharat Krishak Samaj said, ”now the government job is pursue state
governments to improve marketing infrastructure so that farmers income rise
steadily,”